2022 Seller tax

[my_treasure_box]

I have a few questions about the new tax that is being imposed on sellers for the 2022 year. I understand sales must exceed $600, but here's my questions:
1. Does the $600 apply to the total sale of the item (including shipping cost), or is it only the money that you actually earn (after eBay fees and shipping)?

2. Do I need to prove how much an item cost to show a loss? (For example, if I paid $500 for an item and sold the item for $200). And if so, how?

3. What about coins? (Example- if I have a rare quarter. It's worth $50 and I sell it for $30. Would I pay taxes on the $50 value or the .25 value?)

Thanks to all who answer! 

[nobody*s_perfect]

 The 1099-K will include all of the funds that eBay processed for you: Item price plus shipping and handling. Here's eBay's Help page about it:

https://www.ebay.com/help/selling/fees-credits-invoices/ebay-form-1099k?id=4794

[maxine*j]

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@my_treasure_box wrote:

I have a few questions about the new tax that is being imposed on sellers for the 2022 year...  

There is no new tax.  There is a new reporting requirement, imposed on eBay and payment processors.  In the past, they had to report sales, via a 1099 form, that exceeded $20,000;  now, they must issue a 1099 for sales in excess of $600.

However, despite that, you were always obliged to report your income, in any amount, and pay any taxes which were due on it.

If you have not been reporting your income for all the many years you have sold on eBay, you should consult a tax professional now to get things on a proper and businesslike footing.

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[caldreamer]

1099 based on total sale (purchase price + shipping).   When you file "business" taxes you can deduct "cost of shipping items, EBAY fees, packing supplies, mileage, cost of goods, etc).   You need to keep receipts for all your expenses and cost of goods.    You pay income tax on the "net amount" after all your expenses.

[monica-sells]

I am not a CPA, nor do I play one on TV........

Just self-employed and filing business taxes since 1998

1. Does the $600 apply to the total sale of the item (including shipping cost), or is it only the money that you actually earn (after eBay fees and shipping)?

The obligatory 1099-K is the total amount processed by Managed Payments on your behalf (less sales tax)

2. Do I need to prove how much an item cost to show a loss? (For example, if I paid $500 for an item and sold the item for $200). And if so, how?

A simple receipt would be the ideal way...if that is not available, you would need some solid, supporting comparables to determine it's current value. (One problem/contradiction with that approach is your sale has just become a statistic for comparables) Also, to show a loss you need to file additional Schedules with your 1040.

3. What about coins? (Example- if I have a rare quarter. It's worth $50 and I sell it for $30. Would I pay taxes on the $50 value or the .25 value?)

Same as any other commodity....What you paid for the item....If it was obtained in a transaction or, say, you found it, your cost basis would be .25...If you bought it for $10.00 (say 10 years ago from a dealer), it would be $10.00.

Not to sound condescending, but these are really pretty basic accounting questions, and since the 'hobby' definition keeps redefining itself, and the 'cost basis' is a gray area that is yet undefined by precedent, I highly recommend utilizing a CPA to review your tax filings before you try to fill in the blanks yourself.....

[luckythewinner]

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I have a few questions about the new tax that is being imposed on sellers for the 2022 year.

There is no "new tax being imposed on eBay sellers this year". There was a change to the threshold that triggered the existing rule that required a payment processor to file a 1099-K. 

 I understand sales must exceed $600, but here's my questions:

The 1099-K report payments processed by a payment processor,  not sales on eBay. I know that might be a subtle distinction, but it is worth noting. Note that if you receive a payment and later refund it, the amount is still reported on the 1099-K. 

Does the $600 apply to the total sale of the item (including shipping cost), or is it only the money that you actually earn (after eBay fees and shipping)?

The 1099-K reports the total payment processed by eBay, including shipping (but not including any sales tax that was collected and remitted directly by eBay). 

Do I need to prove how much an item cost to show a loss? (For example, if I paid $500 for an item and sold the item for $200). And if so, how?

That is a question for your  tax advisor. It depends upon how you are accounting for the income on your tax return. But generally speaking, if you are reporting this as business income on Schedule C, you will need adequate documentation i the event you are audited. And "adequate" is whatever you can get the auditor you are dealing with to accept. 

What about coins? (Example- if I have a rare quarter. It's worth $50 and I sell it for $30. Would I pay taxes on the $50 value or the .25 value?)

Again, what you pay tax on depends upon how you are accounting for the income on your tax return. But on as a business filing a schedule C, what you would generally report as income would be the $30 sale price, and what you would generally report as the cost would be whatever you paid for it.

[mam98031]

@my_treasure_box 

First, there is NO NEW tax.  We have always been responsible for reporting our income, all income, on our federal tax returns.

The only thing that changed was a FORM that IRS uses.  The minimum threshold on a 1099K form is what changed, NOT the minimum threshold in which you are suppose to report your income to the IRS.  The 1099K is simply a FORM and does not now nor has it ever set the minimum threshold that people are suppose to report their income to IRS.

IRS does not have a minimum threshold for reporting income.

So if you get paid $600 or more into your Managed Payment account BEFORE any refunds or fees, you will receive a 1099K in late January 2023 for your sales in 2022.  This is total money received into your MP account without exception.

You may find some of these links helpful.

https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

https://www.irs.gov/businesses/gig-economy-tax-center

https://pages.ebay.com/seller-center/service-and-payments/2022-changes-to-ebay-and-your-1099-k.html

[femmefan1946]

It's not new. Sellers have always been required to pay taxes on income.

It's just that eBay (and other venues) are now required to send you a form telling you what income you received through eBay .

1.) the total sale

You can deduct your expenses from the $600 or more on the form.

These would include your procurement costs , postage costs, packaging costs, eBay and MP fees.

You don't have to prove them unless you are audited.  Keep all your invoices and print out your eBay paperwork, since eBay does not keep these records for you.  (Insert stale joke about the paperless office here.)

[dbfolks166mt]

I have a few questions about the new tax that is being imposed on sellers for the 2022 year. I understand sales must exceed $600, but here's my questions:

The tax is NOT new there has always been a requirement to report net income on both Federal and State income tax filings. That being said. 

1. Does the $600 apply to the total sale of the item (including shipping cost), or is it only the money that you actually earn (after eBay fees and shipping)?

The $600 1099 reporting requirement applies to the gross amount of your financial transactions through a third party financial process for the calendar year. It really has nothing to do with "sales" although there is generally a connection. What this means is you will receive a 1099 from EVERY third party financial processor you receive funds through. While eBay is one you may also get one from PayPal, Venmo, Google Pay, Stripe...... if you receive money from any of those financial processors for transactions outside of eBay. The 1099 reflects any and all funds you received other than sales tax which is collected from the buyer and submitted to the states. 

2. Do I need to prove how much an item cost to show a loss? (For example, if I paid $500 for an item and sold the item for $200). And if so, how?

That is a question for your tax adviser. You can operate a business at a loss for a limited number of years before the IRS will categorize you as a hobby seller which has a whole other set of tax implications. 

3. What about coins? (Example- if I have a rare quarter. It's worth $50 and I sell it for $30. Would I pay taxes on the $50 value or the .25 value?)

You pay taxes, both income tax and SE tax on the net income. In your quarter example if you sell it for $30 and had/have free shipping your tax liability would be 

$30 - (COGS (what you paid for the quarter) + shipping cost + ebay fees, + business expenses))

Business expenses can include packing and shipping materials, POV mileage on your vehicle, Office supplies (paper, ink, software.......) and potentially a LOT of others that your tax professional can discuss with you. The amount of your tax liability will depend on your filing status and the income bracket you fall into.

Thanks to all who answer! 

[gosimus]

@femmefan1946 

< Sellers have always been required to pay taxes on income >    

But the word "always" is incorrect.  Or, it might be correct in Canada, but in the U.S., taxation on income dates only from 1913, when the 16th Amendment was ratified, authorizing direct taxation of individuals.  For the first 124 years of our Republic, we were taxed as per Article I, Section 9.

The 16th Amendment to the U.S. Constitution superseded Article I, Section 9, "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken."  

Basically, proportioned to the census means that the government figures out how much they need, divides that by the population, and the quotient is how much each person pays; in other words, everybody pays the same amount as their share of funding the government.  Make that their fair share, as the dims are so fond of saying. 

Each person paying the same amount seems more equitable.  Say I make 50,000 a year and my next door neighbor makes 100,000 a year.  We live on the same street, each of us gets the same protections and the same services from the government, so why should he have to pay twice as much as I do to fund that government? 

So why was the 16th Amendment passed?  Three guesses and the first two don't count.  It's another way for the government to reach into our pockets.  Just another money grab.

[femmefan1946]

Interesting.  Thank you for the history lesson.

The graduated income tax came in about the same time here and  was made permanent in the 1930s.

[buyselljack2016]

As others have posted, the $600 is item cost+ shipping paid by the buyer.

Beyond that there is no change. Just do it the same way you have been doing it for years.

There is no new seller tax for 2022.